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Hong Kong: Asia's Financial Hub

Hong Kong: Asia's Financial Hub. Young Professionals Committee 31 October 2011 Highlights ESBC meeting 15 th December 2011. Topic. The role of Hong Kong as a hub for Finance in Asia has been evolving faster than ever.   Main Factors: Regulations Geographical location

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Hong Kong: Asia's Financial Hub

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  1. Hong Kong: Asia's Financial Hub Young Professionals Committee 31 October 2011 Highlights ESBC meeting 15th December 2011

  2. Topic The role of Hong Kong as a hub for Finance in Asia has been evolving faster than ever.   Main Factors: Regulations Geographical location Skills available Questions: 1) Will Hong Kong prevail in an increasingly competitive Asian Financial market? 2) How this would impact the local job market?

  3. Our Speakers: Why we chose them? John Levack Managing DirectorElectra Partners Asia Limited, Hong Kong Veronique Lafon-Vinais Adjunct Associate Professor, HKUST;Director, Tai Tam Corporation

  4. Veronique Lafon Vinais: A Banker’s perspective • HK’s role in Asian financial markets – current status • ECM – mostly Greater China • DCM (G3 & local currency) – dim sum market, G3 for north Asia • FX – major hub is Singapore • M&A – mostly for Greater China, Sing is hub for South and Southeast Asia • 2. HK pro/cons analysis • A. Strengths: • Gateway to China/greater China/North Asia • Infrastructure (port/airport/technology/transport…) • Rule of law • Education (top business school!) • Work ethic • B. Weaknesses: • Political (in)dependence from Beijing • Pollution • Distance from south Asia • Education (heavy government investment in Sing v. HK; US and European unis setting up campus in Sing/China) • Social inequality • 3.“Talent” in HK v. other Asian cities • % of educated population in HK v. other cities • Language skills in HK v. Sing – English level? Mandarin v. Cantonese? • Work ethic (HK survival skills v. Singapore?) • Culture and diversity

  5. John Levack, A Fund/PE Perspective 1/2 • Hong Kong is back at the center for the offshore RMB settlement and the Asset Management industry for China. “We will support Hong Kong in consolidating and elevating its position as an international financial, trade and shipping center, and enhancing its global financial influence.” 3/2011 China Five Year Plan • Figures about HK Fund Industry • HK Asset Management business (excl Insurance, Private Banking) • SFC regulated entities in HK - AUM US$850 bn at 12/2010 • Includes Hedge & Private Equity – but bulk is quoted equities • 66% of AUM is sourced from non-HK investors • Mainland China money contributed only $10 bn • 80% of assets invested in Asia • 350 entities registered with SFC • Fund entities are offshore (mainly Luxembourg & Dublin) • Employing 29,000 people in HK (76% sales & marketing)

  6. John Levack, A Fund/PE Perspective 2/2 • Hong Kong as a fund hub B. Strength • Gateway to China/greater China/North AsiaCapital – and free capital flows • Legal framework • Legal enforcement • Manpower availability • Double Tax Agreements • Low Tax Rates B. Weaknesses • Onshore RMB fund growth • Singapore as Fund hub (Distance from south Asia) • Too narrow focus on China

  7. Recommendations • Government investment in education in HK should increase (land, funding…) • More opening to foreign students (limited to 20% in local Us at moment)  keep on attracting talents • Opportunity for China inbound/outbound investments • Government should reduce issue with tax treaty to bring Offshore funds onshore • Follow regulations closely as it could impact some parts of the financial sectors ( ex: regulations on derivatives, more transparency from hedge fund…)

  8. Appendix

  9. Asian Private Equity: where invested (in 2010)

  10. Asian Private Equity: Capital Under Management (2010) Source: AVCJ

  11. Hong Kong Private Equity: Capital Under Management $ bn under management Source: AVCJ

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